Fiat willing to meet creditor banks soon, source says

TURIN, Italy -- Fiat managers are willing to meet banks soon, a financial source said Monday after the creditors demanded an update on talks between Fiat and its partner General Motors.

In meetings with GM over the last few weeks, Fiat has reportedly asked for a cash injection of about $2 billion in return for changing a "put" option that allows it to sell its 80 percent stake in carmaking arm Fiat Auto to GM from next year.

The banks, like many investors, see the "put" as an essential ripcord that could allow Fiat to end its checkered carmaking history and focus on other businesses. They wrote to Fiat management and the group's controlling Agnelli family last week seeking clarification on the state of the talks with GM.

"Fiat has sent a speedy response to the banks saying it is willing to meet them soon," the financial source said.

Last week, Fiat Chairman Paolo Fresco said there were no disagreements with the banks -- led by Sanpaolo IMI, Capitalia, Unicredito and Intesa -- on how to tackle the latest crisis.

Slumping car sales and a bleeding of cash at Fiat Auto have pulled the insurance-to-energy giant into deep losses and last year forced it to turn to the banks for a convertible loan of $3 billion, worth about the same as the Agnellis' stake.

The banks have since played an active role in plotting the future of Fiat but were left in the back seat when Fiat began the negotiations with GM.

Financial sources in Milan said Fiat's four top creditors expected to be updated on the GM talks at the end of this week once CEO Alessandro Barberis returns from meeting senior managers of Fiat's tractor making arm CNH Global in Chicago.

Last week Barberis said he did not plan to meet with GM while he was in the United States.

GM, which already owns 20 percent of Fiat Auto, wanted Fiat to cancel the "put" and hand over its Alfa Romeo brand and its Brazilian operations in return for a cash injection that could be used to help recapitalize Fiat Auto, reports have said.

Industry Minister Antonio Marzano told reporters in Milan that the Fiat-GM talks were going "as expected. I think the financial terms have now been cleared up and they will soon start to realize the plan."

Almost weekly, a new Fiat rescue plan bubbles up in the Italian media. Common to all the speculation is that Fiat Auto needs new cash after making an operating loss of $1.3 billion to $1.5 billion last year.

In January, the Agnellis said they would carry out a capital increase of $268 million at family piggy bank Giovanni Agnelli & C., which could be followed by capital increases at holdings Ifi and Ifil, which control Fiat.